Berkshire Hathaway Earnings “Acquisitions and Investment Portfolio Gains Boost Overall Results” – Morningstar

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Morningstar published its updated analyst note for the second-quarter earnings report for Berkshire Hathaway Inc Class A (NYSE:BRK.A).

Berkshire Hathaway’s Earnings

With wide-moat Berkshire Hathaway reporting second-quarter results that were in line with our expectations, we expect to leave our $555,000 ($370) per Class A (B) share fair value estimate in place.

Second-quarter (first-half) reported revenue, which includes unrealized and realized gains/losses from Berkshire‘s investment portfolios, increased to $125.6 billion ($245.7 billion) from $9.3 billion ($78.1 billion) in the year-ago period(s).

Excluding the impact of investment gains/losses and other adjustments, second-quarter (first-half) operating revenue increased 21.5% (21.0%) to $92.5 billion ($178.0 billion), with much of that gain coming from the Alleghany acquisition and the onboarding of operating results from Pilot Travel Centers (in January 2023).

Operating earnings, exclusive of investment gains/losses, increased 6.6% (9.2%) year over year to $10.0 billion ($18.1 billion) during the June quarter (first half of the year), with most of the company’s segments posting solid operating earnings growth (with insurance getting a big boost from the Alleghany deal) except for BNSF, which posted a large operating earnings decline.

When including the impact of the investment gains/losses, reported operating earnings increased to $35.9 billion ($71.4 billion) from negative $43.6 billion (negative $38.0 billion) in the prior year’s period(s).

Book value per share, which still serves as a decent proxy for measuring changes in Berkshire’s intrinsic value, increased 6.4% sequentially to $372,966 from $350,405 at the end of March 2023, slightly above our internal forecast of $3372,481.

The company closed out the second quarter with $147.4 billion in cash and cash equivalents, up from $130.6 billion at the end of March 2023, as unutilized free cash flow, along with net stock sales of $6.6 billion, kept the firm from reducing cash balances. By our estimates, Berkshire came into the third quarter with $106.9 billion in dry powder.